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Costa Rica telecom market seen opening soon


Costa Rica telecom market seen opening soon

3 April 2008

By Brian Harris and John McPhaul

SAN JOSE, Costa Rica (Reuters) - Costa Rica, one of the few Latin America countries still with a state-run telephone sector, is expected soon to open to big foreign players as part of a trade deal with the United States.

Costa Rican President Oscar Arias told the Reuters Latin America Investment Summit late on Wednesday that foreign telephone firms are poised to enter the Central American country but that national operator ICE will continue to play a key role in the industry.

"The (government) will be very careful to listen to the offers of companies that want to come here to compete with the state firm, which will be the dominant firm without a doubt," Arias said.

Opposition lawmakers in recent weeks have backed off earlier attempts to block final passage of laws to open key sectors of the economy after Costa Ricans voted in favor of a regional free trade deal with the United States last year.

Costa Rica narrowly approved the U.S.-Central American Free Trade Agreement, or CAFTA, in a referendum in October, and lawmakers have been haggling over the details of its implementation since then.

Among other legal changes, the deal requires Costa Rica to open parts of its telephone industry and its insurance business to open to private and foreign competition.

Because those industries contribute heavily to the nation’s social services budget, critics worry about moving them into the free market. Lawmakers dragging their heels forced an extension to CAFTA’s ratification in February.

Since then, opposition legislators have pledged to end parliamentary maneuvers to block passage of laws necessary for the trade deal to take effect. He said Costa Ricans would benefit from the telephone industry’s privatization.

"Like everyone, I want competition to improve the quality and price of services," Arias said.

While Costa Ricans say the ICE has done a good job extending basic telephone service throughout the country, the quality of cellular and Internet services lags behind neighbors like Panama and El Salvador.

The end of the state telephone monopoly, which was a top issue in the debate over whether to pass CAFTA, will apply to cellular and Internet access services, not fixed lines.

Across Latin America, companies like Mexico’s Telmex (TELMEXL.MX: Quote, Profile, Research) (TMX.N: Quote, Profile, Research) and America Movil (AMXL.MX: Quote, Profile, Research) (AMX.N: Quote, Profile, Research), Brazil’s Oi Participacoes (TNE.N: Quote, Profile, Research) and Spain’s Telefonica (TEF.MC: Quote, Profile, Research), are battling for fixed-line, cell phone and fast-growing Internet market share.

CAFTA, the second-largest U.S. export market in Latin America after Mexico, includes Guatemala, El Salvador, Honduras, Nicaragua and the Dominican Republic. Costa Rica, a popular eco-tourism destination, is the only CAFTA member not to have implemented the accord by a deadline last month.